Seventy Seven Energy Inc. (NYSE:SSE)

CAPS Rating: 5 out of 5

Results 1 - 2 of 2

Recs

0
Member Avatar candle2014 (< 20) Submitted: 8/12/2014 11:14:47 PM : Outperform Start Price: $24.25 SSE Score: -9.63

The company has its risks, a high debt load and it relies on one customer for a majority of its revenues (their old parent company CHK). However, the stock currently trades too cheaply since being spun-off.
SSE trades at a P/S of roughly .6 while the oil service industry average P/S is closer to 2.5. That leads a large margin of safety even if SSE doesn't reach the industry average. A 1.8 P/S ratio, still below industry average, would be a 200% gain in the stock.
The company has also demonstrated that it can grow revenue from other customers besides CHK in its most recent quarter, revenue from other thrid parties was up 164% compared to the 2nd quarter in 2013. The company is also spending money updating its drill rigs from old tier 3 rigs to tier 1 rigs. Once these rigs are fully operational, OCF should rise while CapEx falls.
Finally SSE finds itself in the middle of the oil service boom. The industry that is expected to continue to grow with the shale developments through out the U.S. The industry tails winds provide an additional boost to SSE.

Recs

0
Member Avatar leaderoftheback (84.16) Submitted: 7/15/2014 3:43:11 PM : Outperform Start Price: $25.17 SSE Score: -11.52

I own it from the spin-off, so for now, I'm keepin' it.

Results 1 - 2 of 2

Featured Broker Partners


Advertisement